Court of Auditors report shows EU budget management on the right track

The European Commission today welcomed the latest Court of Auditors' report on the management of the EU budget. The report confirms the major improvement in the current programming period compared to the last, with a substantial decline in the headline 'error rate' over the past decade.

The EU's accounts have consistently received a clean bill of health since 2007, and the level of error in EU spending has dropped considerably compared to years prior to that. This is due to a fundamental overhaul in accounting practices, tighter rules on EU spending, stricter supervision, and stronger control measures.

In 2012, the Commission corrected or recovered €4.4 billion, in the framework of the multiannual correction process. Such corrective measures are vital given that, according to the Court, Member States are still not doing enough to protect the 80% of EU funds that they manage.

Importantly, the kind of errors identified in today's report will be reduced further by new measures being introduced into the next generation of EU programmes for 2014-2020. The Commission is pushing for greater focus on the quality of spending and for full responsibility to be taken by every actor in the chain when it comes to controlling EU funds. There will be tougher corrective measures, a new system of performance targets, and a major simplification of the rules for beneficiaries. The result should be a further decline in the error rate and even better delivery of the EU budget for its citizens.

Algirdas Šemeta, Commissioner responsible for Audit, said: "The progress made in protecting the EU budget over the past few years is proof of what can be achieved with determination, commitment and a clear strategy. While there might be a slight fluctuation in error rate from one year to the next, overall there has been a marked improvement in the management of EU funds. Now we need to go the extra mile. The focus must be on what really matters to our citizens: value for money and money well spent. We've created the right framework to achieve this over the next seven years – now it is a question of delivering on it."

Correcting and Protecting

Measures to correct and recover misspent funds are one of the primary safeguards in place to protect the EU budget, along with the many preventive measures. In recent years, the Commission has greatly increased the use of the "stick" when it has concerns about how EU funds are being used. In agriculture alone, the Commission claws back about € 1 billion every year from Member States because EU rules weren't respected or controls weren't up to scratch. And over the course of 2012, the Commission temporarily blocked structural funds in every single Member State until various concerns were addressed.

Over the 7 year budget period - corrective measures have protected EU taxpayers' money and forced improvements to Member States' control systems when it comes to managing EU funds. For the 2014-20 period, these corrective measures will be further strengthened and expanded. For example, the possibility of suspending payments, in cases of serious mismanagement, will be extended to cover agricultural funds.

The role of Member States

Holding Member States to account for how they manage EU funds is vital as, once again this year, the Auditors were critical of the Member States, who manage 80% of EU funds. For example, the Court's report notes that 56% of errors in Cohesion Policy "could, and should," have been spotted by the Member States, even before any claim for funds was submitted to the Commission.

The European Commission has proposed big steps to further improve the management of EU funds. But those can only deliver if Member States, too, step up to the mark. Therefore, the new Financial Regulation focuses on measures to encourage national authorities to improve their management and control systems, and to fully assume their responsibility for the EU budget. For example, from next year if Member States fail to address irregularities on time, they risk losing EU funds for programmes definitively.

In parallel, the Commission has focussed on measures to reduce errors in EU spending by facilitating compliance with the rules. For example, simplification has been put at the heart of the Horizon 2020 programme for research and innovation, because simpler rules are easier for beneficiaries to follow, and easier for authorities to check. Through its audits, the Commission has been able to assess some root causes of errors, enabling Member States to amend their programmes accordingly. Another example of this can be seen in improvements made to the Rural Development programmes in Portugal, Spain, Bulgaria and Italy. And support for local advice and training will be increased in the next financial period, to ensure the better handling of EU funds by both the beneficiaries and the national authorities. One way of doing this is through the recently set up Competence Centre for EU Structural Funds in the Directorate-General for Regional and Urban Policy, which provides support to national and regional authorities training and advice.

Background

Errors do not mean that EU money is lost, wasted or affected by fraud. In fact, fraud affects only 0.2% of the total EU budget, and there are reliable instruments in place to uncover it and make sure money is paid back. When the Court of Auditors refers to an error rate, it means that money should not have been paid out because of what are sometimes unintentional mistakes. Where errors do occur, solid mechanisms are in place to detect and correct them.

For 2012, the ECA puts the overall error rate at 4.8%. This is higher than last year's error rate. However, as the Court itself acknowledges, this is partly due to an update of its sampling approach. The error rate in Cohesion policy, energy and transport is in line with the improved rates since 2009. This confirms the better functioning of the system in the current period. For agriculture, the error rate in direct spending is 3.8%, compared to 2.9% in 2011. This can be almost entirely attributed to particular problems in 3 Member States, which the Commission is already addressing. Rural Development maintains one of the highest error rates at 7.9%, although it has remained stable compared to the previous year. Together with Member States, the Commission already took action to address this situation, but the measures need time to show effects, as the European Court of Auditors acknowledges itself.

In September 2013, the Commission published a Communication detailing all the measures taken to protect the EU budget, particularly following the 2011 budget discharge. It shows the Commission's active role, and firm commitment, to ensuring that the EU budget is protected.

Next steps

Following the publication of the Court of Auditors’ annual report, the Council will provide the European Parliament with a recommendation on whether or not to grant budget discharge to the Commission. Based on this recommendation, the European Parliament will vote on its discharge resolution for the 2012 budget in May 2014.